Auto, energy amongst key losers

Thu, 25 Mar 01:30 pm

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The post noon session saw the Indian markets trading in a range bound manner during the previous two hours of trade. While stocks from the healthcare, realty and FMCG spaces are amongst the few gainers, those from the auto, oil & gas and IT spaces are amongst the key losers. Stocks from the capital goods and power sectors are trading marginally in the red.

The BSE-Sensex and the NSE-Nifty are currently trading lower by around 40 points and 10 points respectively. Stocks from the midcap and small cap spaces are however, trading in the green, with the BSE-Midcap and the BSE-Smallcap trading marginally higher. The rupee is trading at 45.58 to the US dollar.

FMCG stocks are currently trading firm led by Nirma, Marico Industries and HUL. The stock of FMCG major HUL is leading currently amongst the top gainers of stocks forming part of the BSE-100 Index. This is however, after featuring amongst the most underperforming stocks in the recent past, especially when compared to the broader market. The stock has been under pressure over the past few months due to rising competition. This has led the company to lose its market share across most of its segments. For example, the soaps and detergents segments, which contribute to nearly half of the company’s topline, have seen their market share fall quite sharply.

To put things in perspective, its laundry business (in value terms) has seen its share fall from 38.7% in December 2008 to about 34.6% in December 2009. As for its soaps segment, the market share (in value terms) has dropped to about 44.6% in December 2009 as compared to 49.6% in December 2008. To add to this, the market is also anticipating a price war with its close rival, P&G Home Care. As such, things could get quite tough for the company going forward.

Auto stocks are currently trading weak led by Tata Motors, Maruti Suzuki and TVS Motor. A leading business daily has reported that passenger car major, Maruti Suzuki is looking to invest nearly Rs 17 bn to expand its plant, which is located in Manesar (Haryana). The plant currently has an installed capacity of manufacturing 300,000 cars. Maruti plans to scale this up to 550,000 units within the next two years. The company has such a big expansion plan at a time when the Indian auto industry is at its best. With every month passing, the number of vehicles sold has been on a constant rise (on a year on year basis comparison). The industry has been recording its highest volume growth month after month. These strong sales figures are precisely the reason for the company embarking on an aggressive expansion plan. However, one should not discount the fact that macro factors such as low interest rates, low commodity prices, amongst others, led to strong sales volumes. It is quite possible that the industry may not see similar growth levels going forward.

Talking about strong sales volumes, FY10 will be a milestone year for the company as it produced its one millionth car during this month. This is a very high figure for the company, considering that it has sold about 8.8 m vehicles since its inception (1983).